According to Satish Pendse, being a late entrant in the ERP space gave Marico the opportunity to study existing implementations in the industry

Whether it is “parachuting” into history by pioneering the switch from tin cans to plastic bottles for oil containers, or “revive”-ing a market for a product as plain as instant starch, Marico has excelled in making life simple for the consumer. To make life easier for its distributors and sales partners, the company implemented an ERP package. Chitra Padmanabhan has the details

Marico’s success with ERP and SCM has shattered the myth that distributors do not welcome automation and have inhibitions in sharing data with each other and the company

For a 10-year-old company, Marico Industries has an impressive list of brands under its banner. Some of this company’s popular products include Sil jam, Parachute coconut oil, Saffola and Sweekar cooking oils, etc. The success of this company gives impetus to their slogan ”Products are what corporations make and brands are what consumers buy.” Marico is the proud owner of nine brands, three of which are market leaders. The business network of the company includes six factories, 32 depots, 3,500 distributors, including carrying and forwarding agents and 1.6 million retail outlets.

The company has two types of distribution chains, the urban chain and the rural chain. Its business process is divided into three business divisions: nature care, health care and the international division. The company registered a turnover of Rs 700 crore, with a profit of about Rs 50 crore in the last fiscal.

To optimise the distribution network and improve its delivery mechanism, Marico decided to leverage on the strengths of an ERP system. The company began the implementation of this system sometime in 2000.

However, the company faced one big problem. On one hand product promotion calls for a lot of creativity, but on the other a full-fledged ERP system in an organisation requires tremendous amount of discipline. “Psychologically, creativity and discipline move in opposite directions and so the management realised that the ERP implementation would reflect a complete paradigm shift in terms of attitude and that issue had to be tackled effectively,” says Satish Pendse, general manager, information systems, Marico Industries. Keeping this in mind, the company began a brainstorming session highlighting the benefits of the implementation. Once the company realised the possible return on investment through ERP it decided to go ahead with the plan, and set the ERP ball rolling.

Legacy systems
Prior to 1995, the company’s systems were virtually manual, but since then it has made significant progress towards becoming computerised. The legacy systems were basically in-house packages based on Foxpro and Ingres which were essentially stand-alone systems catering to the specific needs of various departments. “The consolidation of data from various departments used to take place at the end of the month during accounts closing,” explains Pendse. Since these systems were stand-alone, Marico felt the need for integration. And as it was anyway toying with the idea of refurbishing its IT system it decided to check out the potential of an Enterprise Resource Planning (ERP) system.

The ‘business advantages’ of ERP systems prompted the company to analyse its potential. “We sought to keep pace with the dynamically changing business environment and saw ERP as the means to achieve it,” says Pendse.

Though the benefits of ERP were fairly apparent, Marico decided to play it safe by chalking out a detailed plan on paper. In order to facilitate this process, it decided to avail of the services of KPMG Consulting. In a span of about four months the consulting firm prepared an elaborate blueprint, presenting Marico with a clear picture of the cost-benefit analysis of the whole ERP exercise. “The vital points highlighted by KPMG were nothing short of an eye-opener in terms of assessing the exact place that we were holding in the market and prioritising the step-by-step moves leading to our long-term goals,” says Pendse.

The report stressed on the fact that opting for an ERP implementation would put Marico on a higher efficiency plane, but would not in any way give it a competitive edge. Marico’s complex distribution chain necessitated detailed planning for an effective Supply Chain Management (SCM) tool. That’s where the idea of an SCM implementation developed. After identifying the rationale behind the need for an integration, it was time for the company to scout for the ideal package. Acting as a ‘project-facilitator,’ KPMG recommended various modules of SAP for ERP-SAP R/3, for SCM-SAP APO, and for business warehousing-SAP BW. Marico was looking at integrating its various departments, namely sales and distribution, HR and quality, finance and the legal taxation departments. It finally decided to make a one-time investment of Rs 12 crore and revamp its entire IT infrastructure.

Assessing the potential
Being a late entrant in the ERP space had its own advantages for Marico, as it gave the company an opportunity to study existing implementations in the industry. It also helped Marico to carefully address the dos and don’ts and spot the most common reasons of some of the ‘not-so-effective’ implementations. “The key to any ERP implementation is its usability and the comfort level of employees. So we decided to systematically cultivate an out-of-the-box thinking in our employees,” explains Pendse.

For an organisation that made an IT investment of such a magnitude after a span of eight to nine years, this meant a major paradigm shift. The IT department had the responsibility of winning the confidence of the management and convincing it of the fruitfulness of the whole exercise. Marico decided to go for a big-bang implementation, where all the modules would go live on the same day. “A nine-month plan (June 2000 to March 2001) of accelerated SAP was meticulously chalked out and we were hell-bent on completing the implementation within the stipulated period,” says Pendse. Conventional wisdom demanded that SAP should be ideally implemented on UNIX, so it was implemented on an HP UNIX operating system. Siemens Information Systems (SISL) was chosen as the implementation partner and ASAP (Accelerated SAP) was used as the standard methodology. The SAP roadmap consists of five stages project preparation, business blueprint, realisation, final preparation, go live and support. Marico drew up a blueprint and highlighted what needed to be customised to best suit its requirements. SAP R/3 was tuned with the latest upgradation to 4.6B and went live in April. The APO, which went live in May 2001 had to be delayed for a month as the company required at least one month’s data to assess the impact.

Managing change
Ingrained within the execution of the ERP operations, was the plan to usher in a change in the work culture. “The implementation will bear fruit only when the transition is managed well and instantly,” says Pendse. The company went by the philosophy that ownership brings out a sense of responsibility in a person. One of the initiatives for creating a sense of ownership among employees was the appointment of functional heads of various departments, as the process-owners, of the integration. The onus of managing the entire process was on these process-owners and to add to the seriousness of the effort, was taken into consideration for their performance appraisals.

This initiative was taken in order to assess the confidence level of the employees in the ERP implementation. A survey was conducted, which recognised the potential obstacle areas and employees were asked to rate these areas. Special attention was given to the areas that received the highest rating. “We had two set of questionnaires on pre-implementation and the post-implementation phase,” says Pendse. This initiative was coupled with a ‘Potential Deviation Analysis’, which is a sum total of the possible deviations in value terms. It is based on the theory of probability in which the maximum scoring aspect will be taken into account and steps would be taken to avoid occurence of such a possibility. The various heads that were covered were inventory, working capital, communication cost, depot space, service level improvements, etc.

MI-NET the supply chain tool
Developing an extensive supply chain is unarguably one of the breakthrough B2B achievements of the company. Going by the KPMG survey, the company made plans to build a tool that would put them on par with other FMCG firms. An additional investment of about Rs 4 crore was made for a customised software package called MI-NET (Marico Information Network). Work on the MI-NET software began in September 2001 and was completed in March 2002. The system went live in April 2002.

Real-time information is the highlight of this software, wherein the preparatory work on change management visibly paid off. MI-NET enables distributors to download various documents related to product schemes, revised prices, etc, issued from the company directly into MIDAS

(Marico Industries Distributor Application Software) and saves considerable time in manual and repetitive data. The distributor can do his own transactions, including billings to retailers and collection from them. If any distributor has failed to upload any data, e-mail alerts and SMS messages are sent to the sales officer for regular intimation. The MI-NET project has bagged the “Lakshya Award” from NITIE (National Institute of Industrial Engineering) in their ‘On-the-Job’ achievers contest for being the best in the systems and IT management module.

One unique feature of MI-NET is that it is compatible with software distribution packages of other FMCG companies as well. This feature has enabled the company to capture a tremendous mind share among its channel partners.

Internet initiatives
Though Marico has basic Internet connectivity, it is solely used for the purpose of e-mails, while data transfer largely happens through PAMA VSATs. Modems were installed in 50 depots in various locations. After the company started working on its ERP operation it realised the need for a better connectivity environment. Finding that a mix of VSAT and VPNs gave it the best cost advantages, the company opted for these options. Out of 50 locations, 25 are integrated through VPN connections and the rest are connected through 8 PAMA and TDMA VSATs. “Though VSATs are more expensive they are known for high uptime as compared to VPNs. We have tried to strike a balance between the two to adopt a cost-effective approach,” says Pendse.

Reaping returns
The implementation of SAP along with MI-NET has presented various benefits to the organisation. It has brought in transparency of operations where all data is available on a real-time basis. Most importantly it has shattered the myth that distributors do not welcome automation, and have inhibitions in sharing data with each other and the company. The system has also brought those distributors placed in remote locations closer to Marico’s management. A distributor is directly linked to the ERP system, which enables him to access transparent information about the stocks-in-transit, pending orders, accounts statement, etc. Pendse says that the company hopes to recover its IT investment in three years.

Going forward
With its ERP and SCM implementation in place, what are Marico’s future IT plans? Explains Pendse, “We are in the process of building a knowledge platform, which will enable the group members to share information and knowledge across the entire group.” In short, Marico aims to create the infrastructure for future collaboration and convert it into a virtual knowledge community. Also on the anvil is the introduction of payment gateways within the system to speed up the payment process. Marico also realises that the IT infrastructure in terms of the SAP suite of products or MI-NET or the data-communication network has good potential for further exploitation. “When the users start basic use of IT tools, they uncover more areas where the same set of tools can deliver more benefits. The same applications can be used for different sets of internal customers who are not tapped till now,” says Pendse.

With its innovative IT initiatives, Marico Industries is all geared up to capture a totally new level in the market space.